Major Cineplex Group

Major Cineplex Group Plc (MAJOR)
Investment thesis
We expect record earnings for 2Q13, due to a very strong movie line-up. The 3Q13 line-up has so far also been good (though not quite in the same league as 2Q13); 3Q13 ticket sales should rise YoY. Our BUY rating stands, based on MAJOR being a laggard play—an FY13 PER of 15.2x against a long-term mean of 19.4x—and hefty FY13 earnings growth.
Record high box office takings for 2Q13
We estimate a record Bt1.6bn in 2Q13 top-10 box office takings, up by 54% YoY and 103% QoQ. Six movies grossed near or above Bt100m in 2Q13—Pee Mak Prakanong (Bt466m in 2Q13; Bt568m in total), Iron Man 3 (Bt269m in total), Fast & Furious 6 (Bt218m in total), G.I. Joe 2 (Bt52m in 2Q13; Bt115m in total), World War Z (Bt85m in 2Q13; Bt104m in total) and Superman: Man of Steel (Bt98m in total). In comparison, only two movies grossed near or over Bt100m in 2Q12—The Avengers (Bt253m in total) and Battleship (Bt148m in total).
Expect record 2Q13 earnings
Our model indicates a Bt350m net profit for 2Q13, up by 60% YoY and 16% QoQ. Stripping out an extra item—after-tax gains from trading SF shares—our core earnings projection would be Bt315m for the quarter, up by 64% YoY and 79% QoQ. The assumed YoY core profit jump was led by ticket sales, concession and onscreen ad revenues and good SG&A control. The revenues of other business units will probably post YoY declines—bowling (down 9% YoY), space rentals (down 4%) and DVD/VCD distribution (down 41%).
Ticket sales are assumed to have jumped 60% YoY. Concession revenue should have grown 60% YoY on a new sales strategy. We assume onscreen ad expansion of 20% YoY, boosted by receipts from screenings of Pee Mak Prakanong. DVD/VCD distribution revenue is likely to post a 41% YoY dive (a deeper net loss at MPIC and a loss for the film Koo Kam). We expect to see a clear improvement in MPIC’s numbers in 2H13 (it has wound up its MVD operation). 
Stronger YoY 3Q13 ticket sales to-date
So far in 3Q13, Wolverine has grossed Bt55m in its first four days of screening (up to July 20). Pacific Rim has so far achieved Bt149m (up to July 20). Despicable Me 2 has grossed Bt76m (up to July 20). We expect the GM of ticket sales to rise in 2H13, due to the sale of 3D glasses and an additional Bt10/ticket revenue share from all movie studios through e-ticketing. Space rental revenue will rise in 2H13 with the opening of the V-Fitness gyms at four branches. We preliminarily forecast a Bt250m net profit for 3Q13, up 28% YoY but down 28% QoQ.